Estimated to cost  $3.5 to $4.8 billion dollars, the Commonwealth will contribute $1.38 billion in an equity investment for the project and the remainder will be financed by Snowy Hydro Limited. 

Prime Minister Scott Morrison said the government is reaching a 26 to 28 per cent emissions reduction target. 

"Snowy 2.0 will inject the energy supply and reliability our electricity market needs, helping cut costs to families and businesses and cut Australia’s emissions," Mr Morrison said. 

Mr Morrison said while three coal fire power stations would make up one renewable energy station, he is listening to what Australians want, which is "lower emissions, lower prices and reliability". 

At the announcement in Talbingo, concerns were raised the project was only going ahead because of the spike in energy bills. 

Minister for Finance and the Public Service Mathias Cormann squashed ideas that the viability of this project relies on expensive electricity prices. 

"When there's a reliance of solar and wind energy and the sun doesn't shine and there's no wind, that leads to reliability issues and spikes in prices," he said. 

"This enables a backup that is environmentally efficient and will improve the market overall, both in terms of ensuring the economy can have access to affordable and reliable electricity." 

Snowy Hydro CEO Paul Broad said this is securing Australia's renewable energy future and as renewable come into the market, it will bring a downward pressure on prices over eight per cent. 

"Last year Snowy Hydro contracted 888 megawatts of wind and solar projects which gave us incredible insights into energy pricing,"  he said. 

"This process confirmed many of the assumption of Snowy 2.0's business case, including that the National Electricity Market has passed a tipping point. 

"New renewables are now the most economic form of new generation, even when filmed by hydro or gas." 

Thousands of new jobs have been promised for the Snowy Mountains region as the Federal government gives a multi-billion-dollar project the green light. 

Snowy Hydro 2.0 is aimed at constructing a new underground power station and revives an old plan to link two of the reservoirs in the northern reaches of Kosziuszko National Park - Talbingo - and Tantangara. 

Minister for Finance and the Public Service Mathias Cormann said the construction will provide opportunities for local businesses, improvements in local infrastructure and increased economic activity.

 "Snowy 2.0 will create up to 2400 jobs in construction and support up to 5000 direct and indirect jobs across the Snowy Mountains region," he said. 

The expansion will increase generation capacity by 2000 megawatts and provide 175 hours of energy storage that is enough to power the equivalent of 500,000 homes during peak demand, putting downwards pressure on electricity prices. 

Prime Minister Scott Morrison said the project is "shovel-ready" and completion expected late 2024. 

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